"IPG delivered another record quarter, driven by the secular shift to high-power products and accelerating adoption of our technology across our largest applications and geographies. We believe IPG Photonics' strong performance this quarter and through the first nine months of 2017 is a direct result of the superior performance, flexibility, productivity, and return on investment of our solutions. In addition, our vertically-integrated business model enables us to more rapidly scale production, reduce costs and deliver innovation than the competition," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer.

Third quarter revenue of $392.6 million increased 48% year over year, and earnings per diluted share ("EPS") of $2.11 increased 64% year over year. Materials processing sales increased 52% year-over-year in the third quarter and accounted for approximately 95% of total sales driven by strength in cutting, welding, and 3D printing applications. Sales to other markets decreased 9% year-over-year. High-power laser sales increased 60% year over year from rapid growth in cutting and welding applications while sales of QCW lasers increased 104% year over year driven by growth in consumer electronics production. By region, sales increased more than 70% in China and 50% in Europe, partially offset by a 10% decline in Japan.

During the third quarter, IPG generated $163.7 million in cash from operations and used $55.6 million to finance capital expenditures. IPG ended the quarter with $1.05 billion in cash and cash equivalents and short-term investments, representing an increase of $215.3 million from December 31, 2016.

Business Outlook and Financial Guidance

"Based on our third quarter outperformance and current backlog, we are now targeting approximately 37% to 39% revenue growth for the full year, up from 32% to 34% previously. This would represent our strongest annual revenue growth in six years, and is a testament to our leadership in providing cost-effective high-power laser solutions to our customers. For the fourth quarter, we expect revenue growth in the range of 18% to 27% year over year or $330 million to $355 million. Our revenue outlook reflects the expected slowdown in spending related to the consumer electronics investment cycle and typical seasonality in China," said Dr. Gapontsev.

For the fourth quarter of 2017, IPG Photonics anticipates earnings per diluted share in the range of $1.55 to $1.80 based on 54,698,000 diluted common shares, which includes 53,440,000 basic common shares outstanding and 1,258,000 potentially dilutive options at September 30, 2017.

As discussed in more detail in the "Safe Harbor" passage of this news release, actual results may differ from this guidance due to various factors including, but not limited to, product demand, order cancellations and delays, competition and general economic conditions. This guidance is based upon current market conditions and expectations, and is subject to the risks outlined in the Company's reports with the SEC, and assumes exchange rates relative to the U.S. Dollar of Euro 0.85, Russian Ruble 58, Japanese Yen 113 and Chinese Yuan 6.64, respectively.

Supplemental Financial Information

Additional supplemental financial information is provided in the Third Quarter 2017 Financial Data Workbook available on the investor relations section of the Company's website at investor.ipgphotonics.com .

Conference Call Reminder

The Company will hold a conference call today, October 31, 2017 at 10:00 am ET. To access the call, please dial 877-407-6184 in the US or 201-389-0877 internationally. A live webcast of the call will also be available and archived on the investor relations section of the Company's website at investor.ipgphotonics.com .

Contact

James HillierVice President of Investor RelationsIPG Photonics Corporation508-373-1467 jhillier@ipgphotonics.com

About IPG Photonics Corporation

IPG Photonics Corporation is the world leader in high-power fiber lasers and amplifiers. Founded in 1990, IPG pioneered the development and commercialization of optical fiber-based lasers for use in diverse applications, primarily materials processing. Fiber lasers have revolutionized the industry by delivering superior performance, reliability and usability at a lower total cost of ownership compared with conventional lasers, allowing end users to increase productivity and decrease operating costs. IPG has its headquarters in Oxford, Massachusetts, and has additional plants and offices throughout the world. For more information, please visit www.ipgphotonics.com .

Safe Harbor Statement

Information and statements provided by IPG and its employees, including statements in this press release, that relate to future plans, events or performance are forward-looking statements. These statements involve risks and uncertainties. Any statements in this press release that are not statements of historical fact are forward-looking statements, including, but not limited to, targeted growth for the full year, revenue and earnings guidance for the fourth quarter, the consumer electronics investment cycle and seasonality in China. Factors that could cause actual results to differ materially include risks and uncertainties, including risks associated with the strength or weakness of the business conditions in industries and geographic markets that IPG serves, particularly the effect of downturns in the markets IPG serves; uncertainties and adverse changes in the general economic conditions of markets; IPG's ability to penetrate new applications for fiber lasers and increase market share; the rate of acceptance and penetration of IPG's products; inability to manage risks associated with international customers and operations; foreign currency fluctuations; high levels of fixed costs from IPG's vertical integration; the appropriateness of IPG's manufacturing capacity for the level of demand; competitive factors, including declining average selling prices; the effect of acquisitions and investments; inventory write-downs; asset impairment charges; intellectual property infringement claims and litigation; interruption in supply of key components; manufacturing risks; government regulations and trade sanctions; and other risks identified in IPG's SEC filings. Readers are encouraged to refer to the risk factors described in IPG's Annual Report on Form 10-K (filed with the SEC on February 27, 2017) and its periodic reports filed with the SEC, as applicable. Actual results, events and performance may differ materially. Readers are cautioned not to rely on the forward-looking statements, which speak only as of the date hereof. IPG undertakes no obligation to update the forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

IPG PHOTONICS CORPORATIONCONSOLIDATED STATEMENTS OF INCOME

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(in thousands, except per share data)

NET SALES

$

392,615

$

266,017

$

1,047,834

$

726,052

COST OF SALES

168,060

121,226

459,716

329,147

GROSS PROFIT

224,555

144,791

588,118

396,905

OPERATING EXPENSES:

Sales and marketing

13,384

10,460

36,347

28,183

Research and development

25,541

20,543

74,281

56,444

General and administrative

21,491

16,797

59,092

46,849

Loss on foreign exchange

3,917

2,905

15,553

6,316

Total operating expenses

64,333

50,705

185,273

137,792

OPERATING INCOME

160,222

94,086

402,845

259,113

OTHER INCOME (EXPENSE), Net:

Interest (expense) income, net

(125

)

373

651

835

Other income (expense), net

459

194

(47

)

342

Total other income (expense)

334

567

604

1,177

INCOME BEFORE PROVISION FOR INCOME TAXES

160,556

94,653

403,449

260,290

PROVISION FOR INCOME TAXES

(44,959

)

(25,426

)

(108,817

)

(74,703

)

NET INCOME

115,597

69,227

294,632

185,587

LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS

—

(8

)

(26

)

(33

)

NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION

$

115,597

$

69,235

$

294,658

$

185,620

NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER SHARE:

Basic

$

2.16

$

1.30

$

5.51

$

3.50

Diluted

$

2.11

$

1.29

$

5.40

$

3.45

WEIGHTED AVERAGE SHARES OUTSTANDING:

Basic

53,440

53,071

53,453

53,039

Diluted

54,698

53,761

54,570

53,752

IPG PHOTONICS CORPORATIONSUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION AND ACCOUNTING STANDARD IMPACTS TO NET INCOME AND EARNINGS PER SHARE

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

2017

2016

2017

2016

Cost of sales

$

1,467

$

1,615

$

4,320

$

4,579

Sales and marketing

536

385

1,504

1,297

Research and development

1,278

1,268

3,715

3,581

General and administrative

2,649

2,395

7,450

6,642

Total stock-based compensation

5,930

5,663

16,989

16,099

Tax benefit recognized

(1,900

)

(1,817

)

(5,473

)

(5,166

)

Net stock-based compensation

$

4,030

$

3,846

$

11,516

$

10,933

(In thousands, except share and per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Excess tax benefit on exercise of stock options included in net income